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Friendshoring: Irish American Supply Chain Examined as a Case Study

How is your company reacting to threats in its supply chain and transforming risk into opportunity?  In a mature application of Quality Risk Management (QRM), companies should lean into the political winds of “onshoring,” “nearshoring,” and “friendshoring” as these concepts have been stood up as well-discussed risk mitigations to the current drug shortage problems.  These concepts seem simple enough but how can a company apply them?  To explore this topic, this blog post focuses on the concept of nearshoring and friendshoring through an overly simplistic example using existing data and known strategies.  Ideally, implementing risk mitigations between two entities is more seamless when both entities have the same risk appetite.

These terms (“nearshoring” and “friendshoring”) have been collectively combined into the term “friendshoring.”  But what exactly does that mean?  An article published by the World Economic Forum (What is ‘friendshoring’? This and other global trade buzzwords explained) referenced friendshoring as “…the rerouting of supply chains to countries perceived as politically and economically safe or low-risk, to avoid disruption to the flow of business.”  Considering the current global unrest of recent years, from the pandemic to the ongoing conflict between Russia and Ukraine, the concerns related to the pharmaceutical supply chain are not decreasing but morphing into other risks.  So where are the opportunities?  A quick glance at trends in trade can bring this concept to life.

Using Ireland’s actions as a case study is illustrative to the concept of friendshoring.  According to the Observatory of Economic Complexity (OEC), using 2022 as a baseline, Ireland has the following trade profile with the U.S. specific to pharmaceutical products:

  • Exports: The Emerald Isle exports USD 83.5B in pharmaceutical products to the United States, accounting for 37% of the exports.
  • Imports: Ireland imports USD 10.9B, with almost 33% of that value being imported from the United States.
  • Others: The next five recipients of Ireland’s exports (Belgium, Germany, China, Netherlands, and France) collectively make up approximately the same 37% as exported to the United States.

This data paints a very clear economic relationship between two trading partners, but it is important to understand the underlying drivers to test for a loosely defined term such as friendshoring.  Below is just a sample of complementary national strategies that may be drivers or data that supports commonality in risk appetites, or, more practically stated, are the trading partners moving in the same direction:

  • Ireland’s Industry 4.0 Strategy 2020-2025: This is Ireland’s six-theme strategy to embrace Industry 4.0 as the compass for future economic development.
  • Harnessing Digital: The Digital Ireland Framework: This follow-up plan was originally published in 2022, with an update in 2024, as an output of the Industry 4.0 Strategy referenced above.
  • 2021-2024-Quadrennial-Supply-Chain-Review (U.S.): This review highlights the response to public policy and executive actions to mitigate potential disruptions in the supply chain.  This review takes a deep dive into the risk of disruption of the pharmaceutical supply chain, considering both public health and national security.  Focus is also given to the “digitalization of Americans’ day-to-day lives” in the report.

Presented here are some interesting economic data and national strategies, but how can this be used to test the concept of friendshoring?  Mitigating risk is best managed when two entities or trading partners have both common goals and risks.  This commonality can then be leveraged as a mitigation plan to build more resilient supply chains in an array of reports, articles, and other governmental actions.  In the regulatory space, this cross-entity assessment is supported by the principles in the FDA draft guidance “Risk Management Plans to Mitigate the Potential for Drug Shortages,” which is, in essence, a specific application of ICH Q9.  This calls out factors such as geographic risk, distribution vulnerabilities, and “capabilities and historical record of the facilities in the supply chain…”  If the concept of friendshoring (as earlier stated) focuses on countries that are politically and economically “safe,” then the economic data and national strategies seem to increase the probability of success for friendshoring.

Lachman has been instrumental in enabling companies to operate at a higher level of quality risk maturity in moving risk from a threat management tool to creating value added strategies.  Utilizing a holistic risk management philosophy can potentially position companies to turn risk into a competitive advantage, whether they operate on a global or local basis, as the global supply chain encompasses all.  For more information on our thoughts regarding mitigating drug shortages or assessing risk in your supply chain, see Lachman’s previous blog post New Release: Global Drug Supply Chain Diversification Alert White Paper.  For a tailored assessment of your firms’ risk across your supply chain from a process and data perspective, contact us at LCS@LachmanConsultants.com for your customized expert assessment.

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